Is it ethical to keep buying clothes from Bangladesh?

May 27, 2013

Yes, say international garment firms and a US diplomat, because the Bangladesh garment industry is ripe for reform. Many, but not all, retailers have agreed to a labor accord that commits them to independent inspections of suppliers’ garment factories in Bangladesh.

Wages are as low as $38 a month. Sweatshops proliferate. Labor conditions are so dangerous that an estimated 1,800 garment workers have lost their lives in factory fires and building collapses since 2005. The latest collapse claimed 1,127 lives, the world’s worst industrial accident since 1984.

Welcome to Bangladesh. Is this where you want your clothes made?

For many well-known global retailers, trying to remain true to their ethical standards, the answer is a resounding yes. One reason? Having profited from the cheap labor in Bangladesh’s 5,000 garment factories, retailers are seen as having a duty to improve working conditions. Given the horrific scale of last month’s collapse of the eight-story Rana Plaza building outside its capital, Dhaka, Bangladesh may be ripe for reform.

“On the labor issue, absolutely, buyers have a critical role and they must be engaged,” Wendy Sherman, US under secretary of State for political affairs, said at a news conference Monday in Dhaka. The US backs the nation’s reforms for the garment industry, she added.

Socially responsible investing groups echo the message.

“There is a moral imperative for companies that have been in Bangladesh for a substantial time and have benefited from the comparatively low wages there” to keep operations there, says David Schilling of the Interfaith Center on Corporate Responsibility (ICCR), a New York-based coalition of institutional investors. “The risks have jumped off the charts. But let’s stay and minimize the risk factors.”

Many retailers have signed an accord on fire and building safety in Bangladesh, led by the International Labor Organization, unions, and other activist groups. Among the retailers who signed up: H&M, Inditex (Zara), Primark, C&A, Tommy Hilfiger, PVH (Calvin Klein), Tesco, Benetton, Marks & Spencer, and Carrefour. The accord commits retailers to rigorous, independent inspections of their suppliers’ factories.

The retailers’ response is not monolithic. After voicing concern about conditions in the wake of a factory fire in Dhaka in November, which killed 112 workers, Disney announced earlier this year that its licensees would no longer source apparel in Bangladesh.

Disney’s move drew sharp criticism from advocates. But Disney might have maximized its leverage for improving conditions in Bangladesh: It explained why it was leaving and told Bangladeshi officials what they would have to do to win back Disney’s business.

“There are different ways of responding to [a qualitative] decline in a firm or a country,” says Adam Kanzer, director of shareholder advocacy at Domini Social Investments, a socially responsible mutual fund firm based in New York. “Disney left, but they did so in a noisy way. That’s responsible. [Whereas] if you just sort of quietly disappear, [that’s] not going to have much impact” on working conditions.

Other retailers, notably Wal-Mart, are shunning the accord and using their own methods to improve factory safety.

“While we agree with much of the proposal, the IndustriALL plan also introduces requirements … on supply chain matters that are appropriately left to retailers, suppliers and government, and are unnecessary to achieve fire and safety goals,” Wal-Mart said in a statement. Instead, the company says it will conduct its own in-depth safety inspections at all 279 Bangladesh factories with which it works and publicly release the names and inspection information. The Gap also declined to sign because of a dispute-resolution measure.

Bangladesh is such a big garment producer – No. 2 behind China – that a company that sources lots of apparel there can’t immediately switch to other countries because they lack sufficient infrastructure to handle big volumes, notes Mr. Schilling of ICCR.

Still, companies will diversify away from Bangladesh, says Julia Hughes, head of the US Association of Im-porters of Textiles and Apparel.

As they do, that will goad some Bangladeshi operations to improve, says Arash Azadegan, director of the Supply Chain Disruption Research Laboratory at Rutgers Business School. Still, inherent risks will persist in Bangladesh. Government oversight is apt to remain weak since the industry is so powerful, he says.

Also, some factories could quietly let conditions worsen as they vie to offer lower-cost alternatives.

“It’s a relationship, not unlike a marriage,” says Mr. Azadegan. “There are times when people stay [in relationships], make improvements, and get things back on track…. There are other times when you decide things cannot be changed, and you just pull out.”